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THE DESPERATION THAT drives millions of illegal immigrants into this country will never subside as long as there are no jobs and no opportunities in their stagnant homeland economies. Fortunately, there is a way the United States could jump-start vibrant, non-corrupt, globalized economies inside otherwise destitute third world countries. We could do it soon, and we could do it for a lot less than we'd have to pay to assimilate millions more illegal aliens. The solution is to adapt and propagate the free market model of post-colonial Hong Kong.

Hong Kong was always different than other colonies. It began in 1842 as a minor trading post, surrounded by empty territory. Like the United States, most of Hong Kong's citizens were drawn there for freedom and opportunity. As Milton Friedman noted, after the Second World War Britain allowed Hong Kong to pursue a classical liberal, free market policy. Even during its own dalliance with socialism, Britain allowed capital to move freely in Hong Kong. Taxes were kept low and there were no exchange or trade restrictions. The results were spectacular. Despite absorbing millions of impoverished refugees, Hong Kong's per capita income rose from about a quarter of Britain's to more than a third larger in just four decades.

In 1984 Margaret Thatcher's UK signed an agreement with China that promised to continue Hong Kong's unique role for another 50 years. Post-colonial Hong Kong was to become a free city inside China, with its own laws, democratic legislature, and independent judiciary. It kept its free market economy, its low rate tax system, and its separate, convertible currency. China traded a negligible dilution of its sovereignty for the enormous benefits it derives from a free Hong Kong. It calls this arrangement "One Country, Two Systems."

More by Ken Hagerty

With billions of people still trapped in poverty, it's time to build new Hong Kongs. The best solution for millions of illegal immigrants rushing to the United States is to offer them hope and opportunity in their own countries.

The United States should create a Free Cities program that would build treaty-based "Hong Kongs" in countries that genuinely want democracy, prosperity, and a way to outflank corruption. These new cities would be joint ventures between the United States, an international financial institution like the World Bank, and the host governments. The U.S. would negotiate 50-year bilateral treaties with the host countries, authorizing the joint venture to purchase undeveloped plots the size of Hong Kong, establish property registries, and institute a complete set of Western freedoms and responsibilities.

Treaty-based Free Cities would offer democracy, low taxes, rule of law, limited government, reliable prosecution of corruption, freedom of faith, speech and press, multiethnic meritocracy, and free trade. They would exemplify free market globalization, rather than the economic exploitation of protectionist colonialism. Like Hong Kong, these tiny places would become safe havens for investors and entrepreneurs. They'd allow citizens to raise capital, attract the skills they need from abroad, and create thousands of new jobs where there are none today.

This strategy would be inexpensive, yet philosophically revolutionary. In a Free City, development wouldn't be a problem at all. Investors and workers will absolutely flock to places where there is freedom, secure property rights, and the rule of law--thereby reversing the capital flight and worker exodus that hobbles nearly every developing country.

The joint venture would only have to build the Free Cities' public infrastructure, and that would be financed by resale of city land, city taxes, and bonds. The global private sector would gladly develop everything else because they'd be able to reap the rewards of their own enterprise.

The people attracted to Free Cities would become stakeholders who would resist aggressively any interference with their freedoms, as the citizens of Hong Kong have. And the host country's ruling elite would learn quickly, as China's did, that they can earn much more in their Free City than they'd ever be able to pocket from foreign aid or "squeeze."

This strategy could change the focus of America's foreign aid programs from government-to-government to people-to-people. Free Cities would mobilize the private sector, NGOs, and the faith community to build first world economies in destitute places. In the process, it could stimulate a profound new American engagement with the poor of the world.

A Free Cities program would appeal powerfully to the idealism and generosity of the American people--and to the friends of freedom around the world. It would put the United States on the offensive in the worldwide war of ideas. And it would put dictators, kleptocrats, and terrorists on the defensive.

The world needs at least a dozen new Hong Kongs. The United States should lead the way and begin building Free Cities in Latin America, Africa, Eastern Europe, and Asia in the next five years. The real answer to illegal immigration is to share the freedom and opportunity we enjoy in America with people around the world.

Ken Hagerty is president and founder of the Global Venture Investors Foundation. Theodore Roosevelt Malloch is chairman and founder of the Spiritual Enterprise Institute